Are Analysts Pounding the Table on Gray Television, Inc. (NYSE:GTN)

Sell-side analysts are offering a consensus “Buy” rating on shares of Gray Television, Inc. (NYSE:GTN). Using the following ratings scale: 1.0 Strong Buy, 2.0 Buy, 3.0 Hold, 4.0 Sell and 5.0 Strong Sell, analysts have an average recommendation of 1.20 on the shares. Based on a recent trade, the shares are hovering around $9.75 which, according to analysts, yield significant upside potential to the $14.75 consensus target price.

Wall Street firms hire hundreds of analysts who provide recommendations on stocks. Typically, these analysts look at a company’s fundamentals, building financial models from this information in order to project future trends, specifically future earnings. These projections are then used as a basis for providing “buy” or “sell” recommendations. Many investors consider these recommendations very seriously, and often times whenever an analyst changes their outlook on a stock, the price change almost immediately.

Analyst recommendations should be approached with caution for many reasons. Many times a conflict of interest arises due to the relationship between company that they work for and the company whose stock they are paid to track. Often, analysts are responsible for creating reports on companies that are currently or could potentially be a client of their employer. Analysts don’t want to offend any companies that could possibly be a potential client down the road, so they are inclined to put a positive spin on the stock.

Beyond issuing buy, sell, or hold recommendations, analysts also create earnings estimates. These are earnings per share (EPS) numbers that analysts believe a particular company will report on its next statement. These estimates have been growing in importance on Wall Street over the years, because the companies that “beat” their estimates usually see their stock prices grow while those who don’t usually watch them shrink.

Earnings estimates can also be manipulated, as the analysts are inclined to minimize them so that it increases the chances that a stock will “beat” the artificially lowered estimate in order to get inexperienced investors to buy.

RSI

Gray Television, Inc. (NYSE:GTN)’s shares may have a significant upside to the consensus target of 14.75, but how has it been performing relative to the market? The stock’s price is 9.75 and their relative strength index (RSI) stands at 58.94. RSI is a technical oscillator that shows price strength by comparing upward and downward movements. It indicates oversold and overbought price levels for a stock.